Welcome Citation Employment Law Seminar TUPE issues Time work and sleep-in

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1 1 Welcome Citation Employment Law Seminar TUPE issues Time work and sleep-in

2 2 OBJECTIVE Know the correct process to follow for TUPE transfers Understand the present situation in relation to Zero hour contracts, the National Minimum Wage and Sleep-ins

3 3 TUPE What do you need to know about TUPE? To protect your business from claims, you need to understand: when TUPE is likely to apply; what TUPE means legally; what you have to do to comply with TUPE and the penalties for failing to do so; and what other steps you can take to protect your business from the effects of TUPE.

4 4 TUPE WHAT IS TUPE? TUPE - Transfer of Undertakings (Protection of Employment) Regulations. The Regulations were first passed in 1981 but overhauled in 2006 and amended in This is a very tricky piece of legislation. The purpose of TUPE is to protect employees if the business in which they are employed changes hands. Its effect is to move employees and any liabilities associated with them from the old employer to the new employer by operation of law.

5 5 TUPE TUPE applies every day to an enormous number of different business transactions and it is essential that employers of all sizes understand what employment liabilities can arise. TUPE can apply (to name but a few of many examples) when employers: 1. Sell or buy part or all of a business as a going concern. the business must continue to trade in the same way as it did before the transfer after the transfer. TUPE will not apply if just shares, assets or equipment are sold to the new owner. In practice, a relevant transfer generally occurs where all or part of the business of a sole trader, partnership or company is sold or otherwise transferred to a purchaser.

6 6 TUPE Business Transfer It is important to note that a transfer can include the situation where a lessor grants a new lease of business premises to a third party lessee and the lessee then continues to run the existing business in the same way without any interruption. Similarly, where businesses are operated on franchise, the transfer of the franchise may invoke the operation of TUPE. The party who is transferring the business is called the transferor and the party who is taking on the business is called the transferee.

7 7 TUPE Service Provision Change 2. TUPE may also apply when employers outsource or make a "service provision change" involving either: (a) an initial outsourcing of a service (e.g. where services transfer from the customer to an external contractor); (b) a subsequent transfer (e.g. where services transfer from the first external contractor to a different external contractor; and (c) bringing the service back in-house (e.g. where services transfer from an external contractor back to the customer); Must be an organised grouping principally assigned to the work, the client should remain the same and the work should be fundamentally the same and not be fragmented at the point of transfer. For example where an office cleaning contract is taken back in house and all the office staff are made responsible for emptying their own bins, cleaning their desks and hoovering their own offices.

8 TUPE 8 What does TUPE mean legally? Employees who are employed in the undertaking which is being transferred have their employment transferred to the new employer on their existing terms and conditions of employment with all their existing employment rights and liabilities intact except for Pensions which are generally excluded under TUPE (there are special provisions dealing with pensions under occupational pension schemes in addition beware the Fair Deal Policy for those employees transferring from the public sector). TUPE states that "all the transferor's rights, powers, duties and liabilities under or in connection with the transferring employees' contracts of employment are transferred to the transferee". This allembracing concept encompasses rights under the contract of employment, statutory rights and continuity of employment and includes employees' rights to bringa claim against their employer for unfair dismissal, redundancy or discrimination, unpaid wages, bonuses or holidays banked holidays (with long serving employees up to 28 days) and personal injury claims etc. Employees can refuse to transfer (or "opt-out"), but depending on the circumstances of the case, they can lose valuable legal rights if they do and may be deemed to have resigned.

9 9 TUPE The new employer steps into the shoes of the old employer and it is as though the employee's contract of employment was always made with the new employer. It is essential that employers know all about the employees they might inherit if they are planning to take over a contract or buy a business and that they make sure that the contract protects them from any employment liabilities which arose before they became the employer. Where an independent trade union has been recognised by the outgoing employer in respect of transferring employees, recognition will transfer to the incoming employer to the same extent. Collective agreements may apply but can be varied after a year but benefits cannot be reduced.

10 10 TUPE For example, if Sopranos plc has been carrying out a contract to supply an insurance company with IT services and then loses the contract to Tenors Ltd, Tenors Limited will not only take over the contract to supply IT services, but will also inherit all the employees of Sopranos plc who were formerly involved in supplying the IT services to the insurance company. If Sopranos plc has failed to pay its employees their wages for the past few weeks, Tenors Limited will inherit the liability to the employees for the unpaid wages under TUPE. ALWAYS CARRY OUT DUE DILLIGENCE AND MEET WITH TRANSFERRING STAFF TO FIND OUT EXACTLY WHAT THEY BELIEVE THEIR CONTRACTUAL ENTITLEMENTS ARE THINK CUSTOM AND PRACTICE. CLIENTS HAVE BEEN REALLY CAUGHT OUT IN THE PAST! Any dismissals will be automatically unfair, where the sole or principal reason for the dismissal is the transfer or a reason connected to the transfer, unless it is for an economical, technical or organisational reason (an "ETO" reason) requiring a change in the workforce.

11 11 TUPE Economic Technical or Organisational reasons entailing a change in the workforce As the new employer is required to take on the employees on their existing terms and conditions of employment, it is prohibited from making any changes to the terms and conditions ions of employment of the transferred employees if the sole or principal reason for the variation is the transfer. This is also the case where the sole or principal reason is connected to the transfer, unless there is an ETO reason for the change, usually requiring a change in number of the workforce. This often makes it difficult, if not impossible, for incoming employers to harmonise terms and conditions of employment of staff after a TUPE transfer. ETO has a very narrow scope and change in workforce has no statutory definition but is also problematic. It is always essential to seek legal advice before embarking down any proposed change to an employees terms and conditions following TUPE transfer.

12 12 TUPE What do you need to do to comply with TUPE? (1) Outgoing employer must inform and consult with staff Employers involved in a business transfer must inform appropriate representatives of the affected employees of the transfer and any measures proposed, and must consult on any proposed measures (if less than 10 employees affected consult individually). If there are any changes or proposals for changes following the transfer, these "measures" will have to be discussed with the representatives of the affected employees The incoming employer is required to provide the outgoing employer with information on proposed measures to allow the outgoing employer to comply with its duty to inform and consult. There is no set timetable for consultation, but the larger the transaction and the more staff affected, the longer the timetable will need to be. If post-transfer redundancies are proposed, if all parties agree, collective redundancy consultation can start before the transfer takes place.

13 13 TUPE If there is a failure to inform and consult, a complaint can be made to the Employment Tribunal. If successful, the Tribunal can award whatever compensation it considers just and equitable having regard to the seriousness of the employer's failure up to a maximum of 13 weeks' pay per affected employee. Information and consultation failures can result in joint and several liability between the outgoing and incoming employers, although the contract governing the transfer can cater for apportionment of liability here.

14 14 TUPE (2) Outgoing employer must provide employee liability information n to incoming employer The outgoing employer has a duty to provide the incoming employer with written details of the transferring employees (including identity, age, particulars of employment, disciplinary and grievance records, employee claims and collective agreements) together with all associated rights and liabilities that will transfer. This information must be given not less than 28 days before the transfer fer, although in practice the incoming employer will aim to attain this information much earlier. If there is a failure to comply with this duty by the outgoing employer, the incoming employer can apply to the Tribunal for compensation which will be assessed with regard to the losses suffered with a minimum award of 500 per employee. A failure to comply with TUPE could therefore expose employers to claims large enough to undermine the entire transaction.

15 15 TUPE What other practical steps can you take to protect your business from the effects of TUPE? Although there is nothing anyone can do to prevent TUPE applying(it is not possible to contract out of TUPE), there are steps which both the outgoing and incoming employers can take to divide up TUPE liabilities contractually between them. Whilst under TUPE employment liabilities connected to the transferring employees will always transfer to the incoming employer (so employee claims should always be made against the new employer), the parties can still agree contractually to divide up the liabilities between them in a different way. This ought to be done by means of contractual indemnities in commercial agreement or contract. If this is something you think would be useful for your business, you should always take specialist legal advice.

16 16 SLEEP IN AND NMW Do you have to pay the NMW for all sleep-in hours? Reg. 15(1A) In relation to a worker who by arrangement sleeps at or near a place of work and is provided with suitable facilities for sleeping, time during the hours permitted to use those facilities for the purpose of sleeping shall only be treated as being time work when the worker is awake for the purpose of working. (Time work: Employee must be paid at least the NMW based on the number of hours of work. Breaks and pay for breaks excluded). Workers can perform more than one type of work within the same contract e.g. a salaried hours worker can be a time worker when working paid overtime. Care workers can be time workers during the day and on unmeasured work during sleep in. It is preferable for sleep-in unmeasured work to be paid at least the NMW.

17 17 SLEEP IN AND NMW Mrs J Whittlestone v BJP Home Support Limited -Claim for NMW for an eight hour sleep in. Care worker was paid 6.35 an hour for the time she spent providing care at the home of the service user. She was also required to work an overnight sleep-over shift from 11pm to 7am where she was required to provide care for 3 young adults with Down s Syndrome but only when it was needed, she was permitted to sleep otherwise and no evidence. She was paid 40 per week for this overnight shift which worked out as below the NMW for the duration of the shift. Mrs Whittlestone made a claim to the Employment Tribunal and claimed she was entitled to be paid the NMW for the 8 hour overnight shift and also for travelling time which Amounted to more than her contractual payment of 40 per week. The Tribunal dismissed the claim so she appealed to the Employment Appeal Tribunal

18 18 SLEEP IN AND NMW Tribunals considered on the basis of whether such time was time work in line with the National Minimum Wage Regulations EAT decided that the employee was entitled to be paid the NMW as overnight shift deemed time work and therefore sleep exemption did not apply to minimum wage calculations. Mrs W faced disciplinary action if she left the home when she was due to be on sleep-over as had to be present in the home during the shift at all times and could not for instance slip out for a late night movie or for fish and chips. This has raised the issue whether when a careworker is asleep and waiting to work, they are in fact working by being there. As case law currently stands, the answer to this is yes.

19 19 SLEEP IN AND NMW Miss S Slavikovska v Mr J Esparon t/a Middle West Residential Care Home EAT case heard on 8 th May 2013 and decision given on 8 th May Claimant worked a sleep-in shift from 9.00 a.m. to 7.00 a.m. the following morning for 25. She was resident in the care home and worked during the day. Held: work was time work she actually worked and carried out duties during the sleep In sessions and was required to do so. The employer was obliged by the Regulations to have staff on the premises at all times And claimant there to fulfil the obligation. It was essential that she was there even if she Did nothing. Therefore entitled to be paid for all the hours she was on that shift.

20 20 SLEEP IN AND NMW No problem if all the hours of the sleepover are taken into account and the pay received in the pay reference period still averages out at the National Minimum Wage or more BUT where the pay does not average out at NMW level is there any argument to counter the decision in the Whittlestone and Slavikovska cases?

21 21 SLEEP IN AND NMW The decisions seem to contradict what appears to have been the government s intention when they drafted the legislation. The Department for Business, Innovation and Skills guide to calculating the NMW still states that Working time for the purposes of National Minimum Wage does not include time spent at the workplace but not working during a time when workers are allowed to sleep (if you provide a place to sleep).

22 22 SLEEP IN AND NMW Neither of the two EAT cases considered if the sleepover was unmeasured work yet this was a potential consideration: Unmeasured work - work that is paid according to something other than time, a salary or the employee s output. Generally the hours present are not the same as the hours worked. They are paid according to hours worked as recorded by the worker or based on a daily average agreement. Where employees are paid more than the NMW for standard hours it may work out overall that the employer has satisfied the NMW. If there is no daily average agreement the employer must record the hours the Employee works during the pay reference period and the employee must be paid, on average, the NMW.

23 23 SLEEP IN AND NMW DAILY AVERAGE AGREEMENT Must be: An agreement specifying the hours contemplated by the contract daily average number of hours employee is likely to work each day which has to be realistic In writing Signed by both parties Agreed BEFORE the start of the pay period to which it relates.

24 24 SLEEP IN AND NMW The unmeasured hours and daily average agreement has not been tested at Tribunal Big risk that Tribunals are going to find that hours of sleep-in are all time work following these two recent EAT decisions and therefore do no fall within unmeasured work so therefore average hours agreement would be useless.

25 25 ZERO HOURS CONTRACTS Zero hours or casual worker? A casual worker contract is generally understood to be a employment contract between an employer and a worker, which means the employer is not obliged to provide the worker with any minimum working hours, and the worker is not obliged to accept any of the hours offered. Casual contracts are commonly used to provide on-call/bank work (e.g. one of the clients of a careworker company requires extra care for a short period of time). Employers frequently draw a distinction between casual workers and zero hours staff on the basis that casual workers have no obligation to accept an offer of employment whereas zero hours contracts imply an obligation to be available and accept offers made. However, this definition of the two types of employment has no basis in law and any tribunal would apply the mutuality of obligation test to any case that comes before it to decide what employment rights should apply.

26 26 ZERO HOURS CONTRACTS The House of Commons Note on Zero Hours Contracts states: notwithstanding the intentions of the draftsman, the case law indicates that, if the day-to-day reality of the work suggests a relationship of employment, the contract will be one of employment. It then goes on to assert that when deciding whether a zero hours contract constitutes a contract of employment, conferring employee status, the wording of the contract will not be determinative of whether there is, in practice, a mutuality of obligation. The tribunal will look closely at the reality of the agreement. If the reality is that there is a pattern of regular work which is regularly accepted, the tribunal may deem the contract to be one of employment.

27 QUESTIONS & ANSWERS 27

28 Thank you 28